Question

Under ............ unemployment the marginal productivity of a worker is equal to zero. (Choose the correct option to fill in the blank)

• A. Seasonal
• B. Structural
• C. Involuntary
• D. Disguised

Hint:

Disguised unemployment = Zero marginal productivity. It is hidden, mostly in rural/agricultural sectors, and doesn’t appear in official unemployment figures.

Answer 1

The Correct Option is D

Disguised Unemployment refers to a situation where more people are engaged in work than actually required. In this case, even if some workers are withdrawn, total output remains unaffected. This indicates that the marginal productivity of the extra workers is zero. It is commonly found in the agricultural sector of developing economies like India. For example, suppose a piece of land requires only 4 workers for cultivation, but 7 workers are employed. The extra 3 workers contribute nothing to total output — they are disguisedly unemployed. Why not the others?
(A) Seasonal: This occurs when workers are unemployed during certain seasons — like agricultural laborers post-harvest — but it doesn't imply zero productivity when employed.
(B) Structural: It arises due to a mismatch of skills or lack of opportunities; it is not directly related to marginal productivity being zero.
(C) Involuntary: It refers to people willing to work at the prevailing wage rate but unable to find jobs. It doesn’t automatically mean productivity is zero.
Hence, only in Disguised Unemployment, the marginal productivity of additional labour is zero.